$417.5 Billion 1977 Budget Approved by Hill COnferees

ByJames L. Rowe Jr.

March 1, 1977

House and Senate conferees late yesterday agreed on a revised budget for the current year which includes $1.4 billion more to create jobs than President Carter proposes. The budget for fiscal 1977 (which ends Sept. 30) also provides room for the full $13.8 billion tax package proposed by the President, which includes tax cuts, rebates and direct payments to individuals. But the tax-writing House Ways and Means Committee already has cut $1.1 billion from that part of Carter's proposals to stimulate the economy.

Congress had to revise the 1977 budget it adopted last September in order to provide for spending increases and tax cuts designed to boost economic growth and to lower unemployment.

The unemployment rate was 7.3 per cent in January, despite nearly two years of economic recovery from the worst recession since World War II. The rate is expected to rise sharply, but temporarily, in February because of the large number of layoffs caused by natural gas shortages and cold weather.

When the new budget is final - technically, both houses must approve the conference report - the legislature can get moving on a stimulus package.

The budget adopted yesterday calls for federal spending of $417.5 billion and estimates revenues at $347.7 billion, which would result in a record federal deficit of $69.75 billion. The President requested a deficit of $68 billion.

In addition to $13.8 billion in tax cuts and direct payouts, Carter asked Congress for nearly $2.2 billion in programs designed to create jobs. COngress decided the Carter spending programs were too small, and the budget adopted yesterday by conferees includes $3.6 billion by Sept. 30 to create additional jobs.

Although the administration has said it wants to keep the stimulus program as small as possible, Rep. Robert N. Giaimo (D-Conn.), chairman of the House Budget Committee, has said that the administration has indicated it can live with a spending program of the magnitude both sides agreed to yesterday. Carter has proposed a stimulus package of $15.7 billion for fiscal 1978, with most of that concentrated in jobs programs rather than tax cuts.

The budget resolution approved yesterday contains about $200 million more spending than does the budget adopted initially by the Senate last week and $100 million less than the House version.

It makes provisions for a controversial program backed by Senate Budget Committee Chairman Edmund S. Muskie (D-Me.) to make emergency money available to families who face the prospect of having their fuel sup- plies cut off because they cannot pay their bills. The administration has not supported the Muskie proposal.

Giaimo said yesterday that the House Budget Committee also opposed the Muskie measure. "I feel it is a bad precedent," he said at yesterday's budget conference, noting that approving it could get the government into a position of paying water bills when there is a drought and air conditioning bills when the weather is hot.

But when word came late in the session that the House Appropriations Committee had just adopted a similar measure proposed by Rep. David Obey (D-Wisc.), House conferees dropped their objections to the Muskie plan. The budget makes room for $200 million in emergency fuel assistance compared with the $300 million program urged by Muskie!

Other spending programs provided for in the congressional budget are: $900 million for countercyclical revenue sharing, $400 million for public works projects, $700 million for public service employment, $700 million for employment and training, and $200 million for job opportunities programs.

In addition to the $200 million in fuel assistance, the budget also makes room for $200 million in railroad and highway construction and $300 million for recreational instruction.

The conference - ands with it a new 1977 budget - almost bogged down on an accounting question: whether payments made to the working poor (the so-called earned income credit) and payouts under the stimulus program which are bigger than the amount a taxpayer owes the government should be counted as spending or as revenue reductions.

Giaimo, whose House committee wanted them counted as spending, was a adamant as Muskie, who was pushed by Senate Finance Committee Chairman Russell Long (D-La.) to treat them as revenue losses.

After several hours, a compromise was reached under which the earned income credit - worth about $856 million - would continue to be treated as a revenue reduction, but the new item, $1.4 billion of refunds in excess of tax liability, would be treated as an outlay. How to deal with the earned income credit - which can send as much as $400 to a working poor person - will be included in the initial budget resolution for fiscal 1978, which Congress must adopt by mid-May.